flexible mortgage options in Calgary

Nov 16, 2020 | Mortgages | 0 comments

Why mortgage flexibility is important

Mortgages | 0 comments

When we are searching for a mortgage, often, we want to try and find the lowest interest possible.  However, it is not just the interest rate that determines how much the mortgage loan will cost you.  It is good to keep in mind that sometimes mortgages with lower rates come with some serious restrictions. The red tape on these mortgages may restrict:

  • how quickly you’re able to repay your mortgage loan
  • when you’re actually able to sell your home (because the penalties for breaching the contract early are so high).


Key Things To Consider When You Are Choosing A Mortgage With The Top Flexibility.  

Pre-payment penalty: This is a fee for repaying your mortgage loan ahead of the predetermined repayment schedule.  Typically, fixed rate mortgages include an “interest rate differential” for the prepayment penalty.  What the heck is that?  (check out our example below and how it can differ between lenders).  Variable rate mortgages generally calculate the penalty as the sum of three months interest on your mortgage, but in some cases, it can be higher.  Avoid these surprises and make sure that your mortgage broker has helped you understand the terms and conditions within your contract before signing on the dotted line. 


Interest Rate Differential Calculation

You purchased a home with a 5-year term of 4.89% with a discount of 2%, giving you a rate of 2.89% fixed term mortgage.  Now, let us say you want to exit your contract at the 2-year mark – leaving you with 3 years left.  The rate for a 3-year terms sits at 3.44%, the bank will subtract your discount from the posted 3-year term rate, leaving you with 1.45%.  From here your interest rate difference is as shows:

2.89%-1.45% = 1.44% IRD difference x 3 years = 4.32% of your balance.  For example, on a mortgage of $300,000 that gives you a penalty fee of $12,960.




Early re-payment can vary from lender to lender, however, and good, closed mortgages should allow you to pay at least 20% of the original principal balance each year without penalty. When you’re looking at mortgage flexibility, you want to be able to make at least 12 lump sum payments per year as well as increase your regular payment amount at anytime. 

Mortgage flexibility

Adjusting Your Payment Schedules

The flexibility to pay either monthly, bimonthly or weekly is key when you’re choosing a mortgage.  Income situations change and you want to be able to adjust your payments accordingly.  In addition, accelerated weekly or biweekly payments are a great option.  Accelerated payments allow you to sneak a few additional payments directly to the principal amount each year which results in reducing your amortization or mortgage life.


Portable Mortgage


Portable Mortgage: A portable mortgage is transferrable from one home to another.  This means that if your situation changes and you need to relocate for work or because your family is growing, you can pick up your mortgage and take it with you to the next property without penalty. 

Bottom line

Finding the right mortgage depends on your specific circumstances.  When shopping for a mortgage, you will want to keep in mind your future earning potential, the security of your job, as well as how quickly you want to pay off the mortgage and preferred payment frequency.  Connect with a broker and grill them with flexibility questions before signing on the dotted line.




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